The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Federal Reserve Head Janet Yellen Hints At US Interest Rate Hike in December

With nearly 40% of its revenues coming from the skin and hair care segment and the company’s increased focus on this division through recent acquisitions, we believe the personal care segment will be a key growth driver for Unilever in future. Known for its mass market skin care brands (Dove, Lux), the company entered the prestige skin care market in 2015 with four key acquisitions – REN, Kate Somerville, Dermalogica and Murad. Unilever is the second largest personal care business in the world after L’Oreal. As the acquisitions it made last year get integrated, the company should start making additional gains in the prestige personal care segment. As Unilever focuses on innovations using proprietary global technologies to meet consumer needs, it can build on its personal care brands through product differentiation aimed at consumer preferences. These initiatives, along with key strategic acquisitions, will ensure that this segment become a key growth driver for the company going forward.

As it looks to expand in the prestige skin care segment and adapt itself to changing consumer preferences, Unilever is looking at acquisitions and innovation to build to a competitive edge for its personal care products. The company recently acquired “Seventh Generation”, a plant-based personal care and household cleaners company, strengthening its position in the natural products market. This comes on the back of the acquisition of Dollar Shave, a men’s grooming start up. These acquisitions come shortly after Unilever’s acquisition spree in 2015, in which it acquired four companies, primarily focusing on prestige skin care brands. The organic personal care market is expected to reach nearly $16 billion by 2020 and Unilever’s acquisition of Seventh Generation can help the company to tap deeper into this market.

Developing products to suit changing consumer preferences is another strategy adopted by Unilever to grow in this segment. And it seeks to leverage regional products for growth, at times expanding them to its global markets. For example, it has launched Ayurvedic products, which have their roots in Indian herbal medicines, and it acquired hair care oil brand Indulekha, which is benefiting from this trend. As it steps up the scale and pace of its innovations, Unilever is looking to roll out these innovations faster across the globe. Its new anti-bacterial deodorant with MotionSense active technology, which started in Latin America, has now been introduced in 36 countries over the first half of 2016.

According to our estimates, Unilever’s share in the global hair and skin care market will increase steadily from around 11% in 2016 to nearly 12.5% by the end of our forecast period

There can be a nearly 10% upside in our price estimate if this share increase at a faster pace (as the company’s acquisitions start showing gains) and reaches nearly 15% by the end of our forecast period. While competition in the skin care market is high, Unilever is well positioned to capture a decent share in this market. Its focus on prestige brands, new trends such as natural and ayurvedic skin care products and the men’s grooming segment can drive this market share. As Unilever looks to diversify its portfolio of personal care products, this division will be a key growth driver for the company in the long term, in our view.